Market Analysis

Below is Larry Baer with Market Alert's commentary for today:

Larry Baer:  Investors have already priced an economic meltdown of epic proportions into the mortgage market - so this week's menu of soggy economic data will not create significant support for notably lower mortgage interest rates.

As I mentioned in this week's edition of "Viewpoint" the trend trajectory of mortgage interest rates will most likely be dictated by trading action in the stock markets. Stock trading, and what it reflects of investors' risk tolerance and sentiment, will probably be far more closely monitored than will the level of December retail sales.

If stock prices manage to rally - look for mortgage interest to edge higher as well. The magnitude of any upward move for mortgage interest rates will almost certainly be sharply muted by a Fed determined to spend whatever it takes to keep anything really "bad" from happening to the mortgage market. On the other hand, if stock prices fall sharply this week - mortgage interest rates will likely take a stab at setting new historical lows with little, if any help from the central bank.

From a technical perspective I see reasons to believe the DOW will make an attempt to work higher during the last two days of the week. For what it is worth, I'm looking for the DOW to make a low somewhere between 8450 and 8250 followed by a rally to at least 8700 -- if not up and through the 9000 level. If my assessment proves accurate - such an event will make it difficult for mortgage interest rates to move notably lower.

Looking ahead to this week's schedule of economic data -- Wednesday's December Retail Sales report (8:30 a.m. ET) and Friday's December Consumer Price Index will likely draw the lion's share of mortgage investors' attention. Retail Sales are expected to have posted the worst holiday performance in years while the consumer price index is projected to confirm inflation pressures remain benign. If the consensus estimates proves accurate, these reports will at best be supportive of steady mortgage interest rates. The mortgage market will close early at 2:00 p.m. on Friday and will remain closed on Monday, January 19th for the Martin Luther King Holiday.